An Analysis of the Effects of State Financial Aid Policy on the Timing of Postsecondary Enrollment: A Focus on Income and Race Differences.

Abstract

The driving force behind the recent increase in financial aid for college education is the rapid growth of state merit-based grant programs that provide scholarships to students who meet predefined standards of academic preparation at the state level, and this trend represents one of the most pronounced policy shifts away from a long tradition of need-based aid. Despite the existing literature on the role of financial aid policies in college-choice decisions for students from different backgrounds, researchers have paid limited attention to exploring socioeconomic and race/ethnic differences as well as the role of financial aid associated with the timing of student enrollment. Given that high school graduates enroll in college at different time points and financial aid is an important predictor of whether and where a student enrolls as well as when a student enrolls in college, this study explores the effects that state financial aid policies have on the occurrence as well as the timing of postsecondary enrollment for high school graduates (or equivalent diploma holders). Utilizing event history modeling on a nationally representative sample from the National Education Longitudinal Study (NELS:88/2000) in addition to state-level policy variables, this study examined how state aid policies differentially affect students’ postsecondary enrollment depending on their family income and race/ethnicity between the years 1992 through 2000. The findings demonstrate that there is a clear and consistent gap in college enrollment for students who are from different income and race/ethnic groups, and that state financial aid significantly affects students’ enrollment probabilities. The results also indicate that the effects of state financial aid vary by income and racial/ethnic backgrounds. The series of simulations conducted revealed that low-income students had enrollment propensities that were more responsive to changes in state aid policy for every racial group, but high increases in the provision of state financial aid do not appear to benefit all race/ethnic groups equally in terms of college participation. The study findings have important implications for state aid policy as well as future research on the role of public financial aid policies in college choice of students from different income and racial/ethnic backgrounds.